Does political corruption affect mergers and acquisitions decisions? Evidence from China

Hao Yang, Qiusheng Zhang, Xiaofang Zhao and Zhongchao Wang

International Review of Economics & Finance, 2022, vol. 78, issue C, 248-266

Abstract: We examine whether political corruption impedes mergers and acquisitions (M&As) decisions. Using a comprehensive sample of Chinese firms, we find that corruption has a substantial, negative relation with the firm acquisitiveness. Further evidence suggests that the impact is more pronounced when firms are non-state-owned and with poor liquidity levels, while attenuated by the anti-corruption campaign in 2012. Our results exist after a series of robustness tests. Additional tests show that acquirers in more corrupt districts create less shareholder wealth. Overall, the evidence is consistent with the hypothesis that firms manage liquidity to seek political favors, and supports the notion that corruption reduces social welfare by impeding M&A.

Keywords: Political corruption; Mergers and acquisitions; Rent-seeking; Liquidity; Anti-corruption campaign (search for similar items in EconPapers)
JEL-codes: D73 G30 G34 G38 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:78:y:2022:i:c:p:248-266

DOI: 10.1016/j.iref.2021.12.003

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